Bechtel Gets $680 million Iraq Infrastructure Contract

Former Secretary of State George Shultz, a proponent of the war in Iraq and a member of the Bechtel board, denied using his political connections to win work for Bechtel and pointed to the company's long history.

By Tim Dobbyn: 04/17/03

WASHINGTON (Reuters) - A contract worth up to $680 million to repair war-torn Iraq's electricity system, water supplies and other key infrastructure has gone to Bechtel Group Inc., the U.S. Agency for International Development said on Thursday.

Worth $34.6 million initially but expected to include repair of airports, ports and possibly work on hospitals, schools, other government buildings and irrigation systems, the contract is the biggest awarded by USAID so far in its initial batch of Iraq projects.

"Restoration of the country's key infrastructure is a priority of the U.S. government's effort to strengthen Iraq's economy and ensure delivery of essential public services to the Iraqi population," USAID said in a statement.

Bechtel, a privately held engineering, construction and technical services company, beat out rival Fluor Corp., also based in California.

The 105-year-old Bechtel helped build the Hoover Dam in the 1930s and 50 years later completed work on the Channel Tunnel linking England and France.

Foreign companies have complained that they cannot be prime contractors under USAID's Iraq program, although the agency has repeatedly said non-U.S. firms can be subcontractors.

"It is anticipated that Bechtel will work through subcontractors on a number of these tasks after identifying specific needs," USAID said Thursday in a statement, adding that Bechtel would also employ local people.

Some lawmakers have complained about the U.S. government's decision to award no-bid contracts in certain cases, as well as the closed-door nature of the process.

Former Secretary of State George Shultz, a proponent of the war in Iraq and a member of the Bechtel board, denied using his political connections to win work for Bechtel and pointed to the company's long history.

"Over the 100-year period there have Republicans in office and Democrats," Shultz told Reuters.

Bechtel would identify what needs to be done and let others bid on parts of the work, Shultz said. "Bechtel may do some of it itself, but undoubtedly most will be subcontracted out to others," he said.

USAID has already awarded smaller contracts to run Iraq's Umm Qasr port, restock schools, bolster local government and assist the aid agency in its Iraq planning effort.

Still pending are contracts to manage air shipments of aid, run warehouses, restore the public health service and promote citizen participation in impoverished Iraqi communities.

The true cost of rebuilding Iraq is still being calculated, but most experts expect it will run to tens of billions of dollars.

The award of the lucrative infrastructure contract had been expected for weeks but had become hung up over whether extra insurance could be extended to contractors working in areas where weapons might be disturbed.

President Bushon Thursday authorized USAID to protect Bechtel from having to pay damages or claims that result from incidents involving chemical, biological, radiological or nuclear weapons, land or sea mines, or other explosive devices or unexploded ordnance.

Fluor said it was disappointed it was outbid on the infrastructure contract but expected to get work in other areas where it had expertise, such as restoring Iraq's oil and gas industry.

"It's safe to say that what you're seeing in dollar amounts to date is just the beginning," said Fluor spokesman Jerry Holloway.

(Additional reporting by Andrea Orr and Adam Tanner in San Francisco)